ICAP Quarterly - Global Trends in Emissions Trading

Issue: 20 29.11.2018

Dear ,

As we head into the festive season, international climate policy is on the table at the 24th Conference of the Parties hosted by Poland. ICAP will be represented in Katowice with several side events – for details, see below.

At the same time, it is also the busy season for domestic carbon pricing policymakers around the world, with preparations underway for 2019. The ICAP newsletter summarizes the latest developments in emissions trading around the world for you.

For more information on the cap-and-trade programs in force and in the works around the world, please visit the ICAP Interactive ETS Map on the ICAP website. It is updated regularly as new information becomes available.

ICAP at COP24: Meet us at these side events in Katowice

This event marks the launch of a newly published ICAP study on accounting for the linking of ETS under the Paris Agreement (see more below). Join the study’s lead author Lambert Schneider from the Stockholm Environment Institute, Laurence Mortier from the Federal Office for the Environment in Switzerland, Lorna Ritchie from the department for Business, Energy and Industrial Strategy in the UK, Brad Schallert from the World Wildlife Fund and Stephanie La Hoz Theuer from the ICAP Secretariat in discussing the future ETS interactions with international frameworks such as Article 6 of the Paris Agreement, CORSIA and offsets for ETS use post 2020.

Potential of Carbon Pricing in Transition to Low-Carbon Economy

Date: 05 Dec 2018Time: 10:00-13:00Location: EU Pavilion

Policy-makers and experts from key carbon pricing jurisdictions, including Maja-Alexandra Dittel from the European Commission and Duan Maosheng from Tsinghua University, will review the state of play and future prospects for their systems in the first segment of this side event co-hosted by ICAP. Subsequent segments will focus on garnering public support for carbon pricing, offset mechanisms and international carbon pricing.

A Guide to Linking Emissions Trading Systems

Date: 10 Dec 2018Time: 11:00-12:30Location: IETA Business Hub

High-level speakers including Marie Chantal Chassé, Minister of the Environment in Quebec; Mary Nichols, Chair of the California Air Resources Board; Ben Grumbles, Secretary of the Department of the Environment in Maryland (tbc); and Kay Harrison from the Ministry of the Environment in New Zealand will celebrate the recent launch of the ICAP Guide to linking and discuss the future of international carbon market collaboration. Marissa Santikarn from the ICAP Secretariat and lead author of the Guide will present the key takeaways from the publication for policymakers considering linking going forward.

Broadening and Deepening: Experiences Supporting the Consideration and Adoption of Carbon Pricing

Date: 13 Dec 2018Time: 13:15-14:45Location: Room 2 (BUG)

Constanze Haug, Head of ICAP Secretariat, Daniel Besley from the World Bank and Conor Barry from the UNFCCC Secretariat along with several country representatives will discuss experiences in supporting the design and implementation of carbon pricing instruments and examine how international support can be scaled up in the future.

Emissions Trading Systems (ETS) around the World

Nova Scotia prepares to launch cap-and-trade program in the new year

On 14 November 2018, Nova Scotia released the Regulatory Framework of its cap-and-trade program, which is set to start on 1 January 2019. The framework details the final design of the program, specifying the system’s scope, annual emissions cap, allocation and revenue usage.

The cap-and-trade program will regulate 21 companies in the electricity and industrial sectors responsible for 80% of Nova Scotia’s emissions. The declining cap will be set annually, starting at 13.68 MtCO2e in 2019. While most allowances will be allocated based on benchmarks and historical emissions, starting from 2020 between 3% and 15% of allowances (depending on the sector) will be auctioned with a minimum reserve price of CAD 20 (USD 15.23).

On 23 October 2018, Canadian Prime Minister Justin Trudeau announced which provinces and territories will be subject to the federal “backstop” measure. These will be Manitoba, New Brunswick, Ontario and Prince Edward Island and Saskatchewan, which have not fully met requirements for a carbon pricing instrument as specified in the Pan-Canadian Framework on Clean Growth and Climate Change.

The backstop measure consists of a combination of a carbon tax (known as the ‘federal fuel charge’) and an output-based pricing system (known as the ‘federal pricing system for large industries’). In the case that provinces already have one measure that meets requirements, then only the complementary federal instrument will be applied. Proceeds from the carbon pricing instruments will be returned to the provinces, with 90% of the carbon tax returned directly to citizens. The remainder will be invested in community-oriented projects.

By September this year, all provinces and territories were required to present plans for a carbon pricing instrument, with the choice of implementing cap-and-trade or a combination of carbon taxes and baseline-and-credit systems. Eligible instruments should deliver an equivalent carbon price of CAD 50/tCO2e by 2022 and be in line with Canada’s federal reduction target of 30% below 2005 levels by 2030. Among the systems found in compliance were Québec, which is operating a cap-and-trade system linked with California, and Nova Scotia, which will launch its cap-and-trade program next year.

Mexico releases draft regulations for pilot ETS

In October 2018, the Ministry of Environment and Natural Resources (SEMARNAT) of Mexico released for public comment draft regulations on the pilot phase of the national ETS. The process has since been suspended to allow the incoming presidency, taking office on 1 December, to conduct consultations. The previous administration had planned to run the pilot ETS for three years, starting in January 2019, before transitioning to a national ETS in 2022.

The current draft regulations outline the key design elements of the pilot phase: With a participation threshold of 100,000 tCO2 per year, the pilot ETS would cover 308 entities in the energy and industry sectors, which are responsible for around 45% of Mexico’s emissions. While the cap is yet to be set, allocation is based on historical emissions and sectoral goals, with 5% of allowances to be auctioned. A domestic offset program is to be established allowing entities to meet up to 10 percent of their compliance obligation with offsets. Limited banking is allowed within the pilot phase, but pilot allowances cannot be carried over to the national ETS. Although participation with the pilot phase is mandatory, the pilot phase does not have penalties for non-compliance.

1 Reported in short tons; one short ton = 0.91 metric tonWhere available, prices reported are the clearing price at the latest auction (denoted with *).Where no auction prices are available, secondary market prices are reported (denoted as **).For conversion into USD, the exchange rate of 29.11.2018 was used.

News from ICAP

Recent Activities

OUT NOW: ICAP Discussion Paper - Accounting for the Linking of Emissions Trading Systems under Article 6.2 of the Paris Agreement

The paper looks at internationally linked emissions trading systems, examining four approaches to account for the flow of allowances across international borders under the Paris Agreement. The findings can inform the ongoing negotiations on the Paris Rulebook, as well as bilateral agreements between jurisdictions.

ICAP-GIZ International Advanced ETS Course in Hainan, China

From 22-26 October, ICAP and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), together with SinoCarbon and local partners in Hainan, successfully held the international advanced ETS training course. Participants included policymakers from China’s national, regional and local governments, as well as from academia, think tanks, business and industry.

DISCLAIMER: The information contained in this newsletter has been carefully researched and compiled by the ICAP Secretariat. It does not necessarily represent the views of ICAP or its members. The ICAP Secretariat does not assume any liability for the accuracy, completeness, or timeliness of the content of this newsletter or the websites that it links to.